KUALA LUMPUR, Sept 11 — It is relatively premature to conclude that there will be no further overnight policy rate (OPR) cuts despite Bank Negara Malaysia’s (BNM) decision to leave the 1.75 per cent rate unchange at its Monetary Policy Committee (MPC) meeting yesterday, AmBank said.
AmBank, in a statement, BNM was less dovish compared to in July and pointed out that the downside risk remained although the economic activity continues to recover from the trough in April, supported by the stimulus measures.
“Hence, it is vital at this point in time to realise that just because we are seeing some good economic numbers, it does not mean the worst is over. Thus, we cannot totally discount that rate cuts have come to a total halt,” it said in a research note today.
Meanwhile, RHB Investment Bank, in a separate note, said overall, it maintained its expectation of no further rate cuts for the rest of the year, unless the Gross Domestic Product (GDP) growth trajectory is disrupted.
“While the condition of the COVID-19 pandemic is still evolving, it appears the government’s handling of the situation is effective in keeping the infection rate from worsening.
“As such, growth is likely to remain on a cautious upward trajectory,” it said.
It said the MPC statement was cautiously optimistic, noting that global growth continues to improve as economies are benefitting from the ease of restrictions, as well as the massive stimulus measures implemented.
However, it said the recovery in the services sector still lagged behind, although trade and the manufacturing sector are improving.
“Domestically, the Malaysian economy is expected to improve further into next year. Indicators such as the labour market, household consumption and trade activity continue to recover, supported by various measures implemented by the government,” it said.
Nevertheless, it said BNM noted that the recovery would be uneven across sectors, with some industries better prepared to rebound than others.
On inflation, the investment bank said the consumer price index (CPI) would likely to contract for the rest of the year following a significant correction in commodity prices, as well as the weaker labour market.
“However, with a better economic momentum next year, inflation is expected to trend higher,” it added.